When it comes to trading and investing - as it relates to stocks - one of the first concepts you must grasp is telling the difference between being a stock trader and being a stock investor.
Investors buy stocks with the intent on holding those stocks for the long term.
On the flip side, the mindset of a trader is such that they are only interested in holding a stock for the short term.
For an investor, long term could mean several years whereas short term to a trader means as little as a few minutes to a few months.
The specific length of time is what determines which type of trader you want to become.
If you want to be a trader, what you want to do is search for the best position for your money and then come up with a short term goal that will allow you to surpass what an investor could otherwise expect to earn from an aggressive portfolio.
This means that you have to have a working knowledge of the mindset of an investor even though your goal is to be a trader.
Also, being a trader does not mean that you have to be trading in the markets at all times.
In fact, during certain times within the market cycle, the best thing for you to do may be to sit along the bench.
The only way to know when you should and should not be active in the market is to spend some time learning how to read the signals.
If you aspire to become an investor, the general rule of thumb is to have an investment portfolio with a mixture of growth, value, domestic and foreign stocks, along with government bonds in all three terms - short, long, and intermediate.
A well-balanced portfolio will generally offer you a constant return as high as 10 percent depending on the type of your investments and the level of risk you can bare, and sometimes even higher than that.